After losing a key investor and facing production disruptions, AO Kronshtadt faces imminent bankruptcy. According to NV Biznes, 40 lawsuits totaling 626.3 million rubles ($7.76 million) have been filed against the company in just the past three months.

The financial collapse of the drone producer demonstrates how Western sanctions, combined with battlefield realities, are systematically undermining Moscow’s defense production capabilities.

Kronshtadt’s drones, including the Orion and Sirius systems sometimes compared to American Gray Eagles, provided crucial long-endurance surveillance and strike capabilities that Russia has deployed heavily in Ukraine since February 2022.

Creditor avalanche buries defense giant

Russian media reports suggest the situation could lead to bankruptcy, as subcontractors who provided services or supplied products but have not been paid are “massively filing lawsuits to be included in the creditor registry,“ according to NV Biznes.

Military and aviation outlet War Wings Daily reports that by May 2025, total claims had already reached one billion rubles, with some sources estimating up to 1.5 billion rubles ($18.75 million) in debts over six months.

Kronshtadt’s last published financial data from 2020 showed losses of 3.6 billion rubles ($45 million), indicating long-standing financial struggles.

Two years of mounting pressure

Kronshtadt has experienced financial difficulties for two years, with the crisis stemming from the 2022 withdrawal of AFK Sistema, the company’s strategic investor and main financing source. According to the NV Biznes report, this sharply worsened investment access and increased debt burden.

US and EU sanctions cut off access to critical foreign-made components while inflating costs and creating production delays. Simultaneously, massive government orders placed heavy production demands precisely when supply chains faced maximum stress.

Ukrainian forces added a third pressure point, striking Kronshtadt’s Dubna production facility on 28 May 2025. Ukrainian drones hit the plant’s roof eight times, severely damaging industrial capacity at the facility producing systems central to Russia’s unmanned warfare strategy.

Industry experts predict collapse

Nikolai Ryashin, general director of Rusdronport, suggested the company is headed toward collapse.

“The company will go the way of bankruptcy, so subcontractors are now rushing to file claims and get closer to the front of the line,” Ryashin said to Defence Blog, an independent defense and security news outlet.

Russia scrambles for alternatives

As Kronshtadt struggles, Russia has sought alternative production methods.

In Khabarovsk, state-funded company Aero-hit built a plant with Chinese partners and became a major drone supplier for Russian operations in partially occupied Kherson Oblast. The facility produces multifunctional Veles drones and plans to reach 10,000 units monthly this year while expanding to more advanced models.

However, this doesn’t solve Kronshtadt’s problems. On the contrary, it might worsen them, as the state is finding alternatives to the ailing company.

Strategic implications multiply

The company’s collapse reveals a fundamental contradiction in Russia’s war economy: the state places massive orders but leaves manufacturers to struggle under sanctions pressure.

Whether Kronshtadt can be restructured or absorbed into another defense conglomerate remains uncertain. Still, the mounting lawsuits and expert assessments suggest Russia’s leading drone manufacturer is facing an inevitable path toward bankruptcy.

This development could significantly impact Moscow’s ability to maintain its drone-intensive warfare strategy in Ukraine.